Microsoft said it would appeal the European Commission's $357M fine,
arguing regulators jumped the gun over demands for technical
documentation.

Laying groundwork for an appeal expected within two months of today's EC decision, Brad Smith, lead counsel for the software giant,
said the commission was acting hastily.

"It's hard to understand why the Commission is rushing to grade our
homework before the due date we've all agreed upon," Smith told
reporters in a conference call following today's announcement.

The EC fined the company $1.9 million a day retroactive to Dec. 16, 2005 through June 20, 2006.

Saying Microsoft had dragged its feet for over two years, EC
Commissioner Neelie Kroes called the software maker's actions illegal
and that it was not above the law.

Regulators also held out the possibility of fining Microsoft $3.9 million
each day if the Redmond-based company does not comply by July 31.

Smith said grounds for the appeal include three points, chief being
lack of clarity.

"This decision did not have the kind of clarity that would justify
this type of fine," according to Smith.

To date, Microsoft has been
given a five-word guideline for what they EC expects from the
company: "complete and accurate technical specifications," said the
company lawyer.

Microsoft may also argue its technical documentation is already used
by U.S. licensees, six of which testified in a March hearing.

The software company is also challenging the EC on a third point:
that this isn't an issue of noncompliance. Every time the EC has asked for
Microsoft to do something, it's been done, Smith argued.

"We didn't need a fine in order to get us to agree to do things,"
according to Smith.

Microsoft is still weighing the EC's decision, according to a
spokesperson.

However, the company is concerned regulators acted
before Microsoft could submit the final batch of technical documents,
expected July 18, according to spokesperson Jack Evans.

That is
earlier than the July 24 deadline the EC had set for the last
installment of documentation.

As expected, industry groups on both sides of the issue had plenty to
say about the EC's decision.

Microsoft supporter CompTIA denounced the fines as part of an
"arbitrary and capricious competition policy" difficult to discern.
The group said only those with "regulatory clairvoyance" can
understand the rules, according to a statement.

The European Committee for Interoperable Systems, a nonprofit group
with members including Adobe, Sun and RealNetworks, in a statement applauded the
EC's action and denounced Microsoft's decision to appeal as impeding
EU antitrust enforcement.

The Software and Information Industry Association (SIIA) hailed the
new round of fines, saying in a statement, Microsoft's delays were
"unjustified and inexcusable."

But are the hand-wringing and fiery words having an effect on
competition? Not likely, say analysts.

David Smith of Gartner downplayed the importance of the Europe versus
Microsoft epic. The market, not the EC, is having more effect on
Microsoft, according to Smith.

Microsoft spends more time worrying about Google than the EU, Smith
said. Microsoft's power is diminishing, providing more opportunity
for competition, believes the analyst.

Like Smith, Matt Rosoff of Directions on Microsoft sees the company
moved by market forces rather than regulatory rulings.

With
Microsoft claiming the EC refuses to issue clear guidelines and the
EC charging the software company won't follow instructions, both
analysts agree we are far from reading the final chapter of the
Microsoft versus EU book.